The purpose of this report is to view a hypothetical retail environment and a RFID potential solution. We have addressed the application of RFID in the broadest possible way to provide for acceptance including most common offerings available currently. Of course certain elements are addressed as to ROI, price performance of tags and equipment and we have done so for the US retail market for applications in general retail.
The ROI challenge for RFID implementation
ROI is the life blood of retail and RFID is now drawing retailer’s attention. This is predictable as an increasingly competitive environment forces successful retailers to continually find ways to maximize revenue opportunities, decrease costs, and provide a consistently positive customer experience.
The statistics prove out that over 70% of all retail out-of-stocks (OOS) are the result of store-level issues.
U.S. retailers lose an estimated $50 billion annually in revenue opportunities from out-of-stocks (in addition to the “bottom line” impact, out-of-stocks are one of the top incidents that lead to a negative customer experience and drive customers to the competition).
U.S. retailers lose an additional $31 billion annually due to shrinkage.
We therefore, through this report, aim to provide Hypothetical Retailer with an item-level visibility required for impacting these real business challenges, moving RFID beyond mandates and into solutions that add significant control to their bottom line. We offer a general solution approach for retail that streamlines inventory management, an attractive
and cost-effective item-level consideration looking at technology currently available. Our goal for Hypothetical retailer is to identify precisely where inventory exists in the front or back rooms; which would help the retail enterprise to thereby reduce out of stocks, shrinkage, labor costs, and ultimately improve the customer experience. In fact, studies have shown that item-level RFID solutions can attack these business challenges with significant success:
- Improve inventory accuracy up to 20 percent
- Reduce OOS by as much as 50 percent.
- Improve sales by as much as 10 percent.
- Reduce cycle-counting time down by as much as 90 percent.
- Cut shrinkage is as 50 percent.Out-of-stocks have been reduced by as much as 50
- Shorten restocking time by as much as 65 percent.
- Improve store labor investment cost to handle replenishment by as much as 15-20
The working of the RFID tracking system
Upon implementation of the RFID Tracking System, every item is tagged with a unique number and RF antennas are embedded in front room and back room shelving systems. In general these are inexpensive postage stamp like tags, The inventory levels and location for tagged items are perpetually monitored through a centralized system that provides real-time inventory tracking and visibility. With this ongoing monitoring, retailers can accurately track which products are selling and how quickly; whether inventory is low and if any group of items need to be re-ordered; or whether any specific items has been misplaced and exactly where they are located currently; what types of products are most likely to be lost or stolen and which promotional offers are working.
RFID based item tracking system functional layout
Furthermore, with our proposed solution, the item-level data gathered by the item tracking system can be tied into existing legacy systems (such as Point of Sale), allowing retailers to utilize many of their existing workflows to gain the benefits of item-level RFID. This will help in minimizing implementation costs required for setting up the proposed
Benefits of the RFID system
The benefits of this item-level RFID Technology offered to retailers falls into 3 primary categories:
- Increased revenues.
- Decreased costs.
- Improving the customer experience.
The main source of RFID problems are overall complexity and novelty of the technology. Radio Frequency Identification is a relatively young technology. As first inventions in this domain were made in the 50’s of the last century, RFID tags started to widely being used only in the end of the 90s. The industry is in the stage of emerging development right now.
There are several frequency ranges allocated for RFID technology. Each of them occupy a niche and resolves specific problems.
Low-Frequency (LF) RFID systems are typically at the range of 125KHz. This band provides shorter distance and lower speed compared to high frequencies. However, LF systems have strong capability for reading labels close to water and metal. Typically, LF systems are used in access-control, animal-tracking, healthcare, product authentication and various point-of-sale applications.
High-frequency (HF) RFID systems operate at 13.56MHz. They provide a greater range and speed than LF systems. Also, the price of the tag is among the lowest of all RFID tags. Typical applications include smartcards, smart shelves for item level tracking, product authentication, airline baggage and data logging.
Ultrahigh-Frequency (UHF) RFID utilizes the 860 – 930 MHz band depending on deployment region (USA or Europe). UHF tags cost about the same HF tags but provide wider reading range (up to 3m) and faster reading speed. One drawback of UHF systems is the limited ability to read tags near or with water and metal content. This range is recommended for distribution and logistic applications and is a basis of Electronic Product Code (HRI) standard. This standard is a focus of Wal-Mart and the Department of Defense in the United States.
Microwave based RFID systems use either 2.45GHz or 5.8GHz band. They provide the highest reading rates, but they are the most expensive systems and have limited range of up to 1m.
UHF RFID Tags
RFID tags can be divided into two groups:
Active tags have embedded power source to transmit information. Tags of this type are highly independent from the environmental conditions and provide confident reading in the wide range. However, the battery power source applies specific restrictions and certain disadvantages. The batteries add significant cost to the total cost of the tag. Moreover, they
have large sizes than passive labels.
Passive tags are powered by energy transferred by radio-wave carrier. The same radiowave delivers reader-to-tag requests. After the request, the decoding tag replies with a tagto-reader response packet. It is done by modulation of antenna parameters due to which result radio-wave is modulated.
Passive tags are very small and handy. However, the main benefit is their low cost, which is near $0.22 per label in 1000 batches. Their price will decrease with further adoption of the RFID technology.
There are several standards for UHF tags and protocols. The most influential standards are published by Hypothetical Retailer Inc joining the leading RFID vendors. The standards describe several tag classes. Table 1 represents a brief comparison of the HRI classes.
Table 1 HRI tag classes
1 Adaptable to noise level
2 Class 0 tags are read-only by standard. Some vendors provide so called Class 0+ tags those allow modification of stored HRI.
Below please review our assumptions on each separate tag class.
Class 0 tags are fast and cheap. They provide relatively high reading performance by cost of reliability and flexibility. Usage of Class 0 read-only tags implicitly increase administrative and logistics cost requiring additional efforts on affixing tags to correct items.
Some tag vendors provide so called Class 0+ tags, which allow writing of HRIs into the labels. This partially solves the problem. Also, Class 0 tags work at US UHF band only, i.e. standard Class 0 tags are unusable in Europe.
Class 1 Generation 1 (C1G1) tags provide Write-Once-Read-Multiple user memory. This eases item tracking. Class 1 tags also utilize more reliable protocol than Class 0 tags and can use European UHF band.
On the another hand, C1G1 tags are much slower than their competitors.
Class 1 Generation 2 (C1G2) are the most advanced and modern tags. They use novel tags sorting protocol, which significantly increases reading performance. Besides that, C1G2 is more secure. RFID HRIs never been transferred via the air as one record. The protocol utilizes handle-based communication, when tags in readers range are called by a 16-bit random number. Moreover, the channel between the reader and tag is scrambled.
C1G2 tags endure brute-force password attacks by locking read in case of multiple authentication failures. Also G2 tags are provided with WORM user memory of the unlimited size by standard.
In the long-term perspective and from the security point of view, Generation 2 tags have significant benefits compared to their predecessors. However, generally G2 labels are more expensive. Besides, there are less offers of G2 ready-to-use labels in the market. Class 0 labels provide greater price-to-features ratio. Moreover, C0 based systems can not be
deployed in Europe.
None of the tag classes have significant advantages over another, therefore the final decision has to be taken considering details of the specific deployment environment. RFID is a relatively young technology. There are many changes in the industry. Some companies enter the market, some leave it. Standards on hardware and protocols evolve. Moreover, business processes of a company change also. Concentrating on single type of hardware and inflexible software may lead to significant losses in the future due inability to accommodate the changes.
The RFID software has to be very flexible allowing for changes on the fly in the whole system. It should allow changing hardware type used by an organization; changing the deployment configuration and etc.
After several years of initial RFID system deployment, maintenance may require up to one forth part of the initial deployment cost to upgrade and adopt emerging standards in RFID technology. During this transitional period, the company staff will need to learn the technology and obtain the required maintenance skills. After that, maintenance cost will again drop. As a business strategy, Total Cost of Ownership must be decreased as much as possible. Therefore, the system should provide user-friendly tools for monitoring, upgrade flexibility and maintenance. These tools will ease exploitation process lowering debugging, monitoring and maintenance efforts.
Usually RFID systems are deployed into environments with preexisting infrastructure. For maximum effectiveness and ROI they should seamlessly integrate into the existing software and hardware. This would lower overall ownership cost and mitigate any risk related to any future migration, large project size and scope.
Before we start reviewing RFID hardware we have to consider communication environment. All hardware should be connected with the computer system via some type of link. Modern RFID devices may be connected by one of the following ways:
- RS-232 serial connection
- RS-422/485 serial connection
- 10/100MBit Ethernet network connection
- USB link
Some devices may support several communication media types.
Serial ports and USB benefit from their relative simplicity. Many computers have free serial ports so ad-hoc deployment is possible. As a plus, RS-485 links can be very long (up to several kilometers). On the other hand, these links have very high cost per port. Additional serial ports cost near $30 to $40/port. Therefore these ports are not very useful for large RFID systems.
Ethernet standard has been widely adopted throughout the world. Nearly any company with several computers has an Ethernet installation. Due this fact usage of IP networks for communication with RFID devices has many advantages:
- There are many qualified professional able to deploy and manage Ethernet infrastructure.
- Ethernet hardware is very cheap. Modern switches are less than $5 per port.
- LAN networks have very good performance compared to serial communication.
However, network technologies is quite complex. There is much more room for configuration errors. For example, an incorrectly configured device may become unreachable via network.
In general, it would be better to use hardware providing both Ethernet and serial interfaces. The main infrastructure should be based on Ethernet and RS ports and could be used for on-site configuration and monitoring.
There are two options in selecting the reader’s vendors. Alien Technologies offers several readers at different prices. The company is a RFID market leader and provides very good support and services.
However, ThingMagic provides very good functionality and flexibility level in the market as well as the best price. Their Mercury 4 reader design is licensed by several companies around the world.
Thus, the specific choice highly depends on your business goals. For a single small to medium sized deployment Alien’s hardware would be more effective. For large installations and long-term usage of ThingMagic’s readers seem to be more cost effective.
There are several inlay vendors on the UHF RFID market. Big companies produce ready-to-use RFID labels and inlays that should be integrated into RFID smart labels or goods. Therefore, there are many companies producing RFID tags based on inlays and ICs of other companies. In the following review, we will provide an overview of inlays and labels
produced by the industry leading vendors only.
It is a recommended practice to select a specific RFID label type based on in-field test results. Due to the nature of radio-waves wall materials and content of items may shift priorities over abstract label comparison.
As mentioned before, the RFID tags should be tested on a deployment site and proposed product types. However, we can recommend using HRI Generation 2 tags due to higher performance and security.
Avery Dennison provides many Gen2 tags of several form factors and sizes including item level label. Also independent experts point to a very good performance of their products. Alien Technologies provides high quality Class 1 Generation 1 labels and several Generation 2 tags. Unfortunately, they do not produce item-level Gen 2 labels yet.
Manufacturers offer bar code printers, RFID ready printers, and RFID printers. In RFID applications, the conventional bar printer equipped with a read/write module, used to print a human readable label at the same time the data is stored to the RFID chip. In order to transfer the data to the chip, the printer is equipped with a UHF read/write module and an antenna. Printers are released as desktop printers and as applicators for production lines automation. Therefore, the buyer can select an option best fitting the requirements. Since the bar code printing specs haven’t changed during long period of time, the main characteristics we need to compare are printing speed, resolution, supported media, service and support.
A wide variety of supported labels is very important. There are a lot of tag types existing within the UHF band. They vary in reading speed, allowing for carton contents and protocols. Labels are available from numerous converters that are using inlays based on different combinations of RFID chips and antenna designs. Printers that work well across this diversity provide the most flexibility. Multiregional support is also sometimes important.
The printing speed is the second important parameter. Companies with high goods turnover require printers to provide ready-to-use labels with sufficient speed. In addition, the printer should validate the write result and separate the efective labels. Other selection parameters are maintenance and integration costs. Printers should have an easy and convenient API and management software.
Some RFID printer vendors provide series of models differ in supported media size and price only. In that case, descriptions of the whole printer family will be provided.
As at current stage we do not know of system implementation details, therefore it is hard to recommend a specific printer model. The final answer depends on label volumes you will need to print daily, type of items you are going to use and other factors. In general case we recommend Zebra RFID printers. The company provides a very wide range of RFID compatible models. The printers are highly flexible and manageable. Thus, it is possible to select a model best fitting your performance requirements and budget.
We suggest building the System using standards and architecture proposed by EPCGlobal Inc. This organization is the leading standards institution in the RFID domain. Most market leaders participate in this organization and provide solutions based on EPC ratified standards and specifications. In the future adoption of EPC’s standards allows
communicating with RFID suppliers without additional efforts. The EPCGlobal provides a wide-range of standards on different aspects of RFID system. They even provide an infrastructure for EPC data exchange between partners and manage EPC number spaces. As we develop the architecture of an Item Tracking System, the specification will not be concerned with some standards on global EPC services. This includes EPC Information Service (EPCIS), Object Name Space service (ONS) and some other. These services can be added to the software system on a later stage if it is a need for
a supply chain management and EPC assignment features. Instead the system may need to include clients for global EPC Network services such as ONS resolver.
RFID industry is in the development stage now. Therefore many aspects of RFID evolve and change. Even EPCGlobal Inc declares flexibility as one of their goals during standards development process. Consequently, flexibility must be one of the main goals in the architecture design. This can be achieved by utilizing component-based architecture with low coupling between components. Also this allows for accelerating software development and increasing overall code quality. Moreover, the system should not lock on some software or hardware providers. There should be ability to adopt new readers, printers or tag types, so special attention should be paid to isolating of hardware interfaces.
By nature, RFID systems are event-driven. A real world object generates events registered by RFID hardware and these events must be processed by the middle-ware. Consequently the design of the low-level function should be built around event delivery and processing.
Higher level modules utilize both synchronous state queries and event processing techniques. So some sort of persistent data storage should be used to store the current system status and accelerate event processing.
Since the RFID system is a critical part of the company, the RFID software must be very reliable. This can be achieved by several ways. First of all, the system must be heavily tested before deployment. However in real world environment it is impossible to write a perfect software. Therefore, the system should provide services to minimize downtime.
The information included in this report is based upon the information publicly when the report was compiled. Data and specifications may change while products retired and new entrants may offer options not considered in this report. Additionally other products and technologies may have gone unconsidered because we were unaware of them. Enterra is not responsible for the accuracy of any technical information contained in this report or any consequences of utilization of information within.